Circular No. A-76 -- Revised
Supplemental Handbook (Introduction)
The August 1983
Office of Management and Budget (OMB) Circular No. A-76, "Performance
of Commercial Activities," establishes Federal policy for
the performance of recurring commercial activities. This Supplement
replaces the Handbook issued with the 1983 Circular and provides
updated guidance and procedures for determining whether recurring
commercial activities should be operated under contract with commercial
sources, in-house using Government facilities and personnel, or through
interservice support agreements (ISSAs). The Revised Supplemental
Handbook is an integral part of the 1983 Circular.
As noted in the
Vice President's Third Report of the National Performance Review, "Common
Sense Government: Works Better and Costs Less," (September
1995), Americans want to "get their money's worth" and want
a Government that is more businesslike and better managed. The reinvention
of Government begins by focusing on core mission competencies and service
requirements. Thus, the reinvention process must consider a wide range
of options, including: the consolidation, restructuring or reengineering
of activities, privatization options, make or buy decisions, the adoption
of better business management practices, the development of joint ventures
with the private sector, asset sales, the possible devolution of activities
to State and local governments and the termination of obsolete services
or programs. In the context of this larger reinvention effort, the
scope of this Supplemental Handbook is limited to the conversion of
recurring commercial activities to or from in-house, contract or ISSA
performance. Circular A-76 is not designed to simply contract out.
Rather, it is designed to:
(1) balance the
interests of the parties to a make or buy cost comparison,
(2) provide a level playing field between public and private offerors
to a competition, and
(3) encourage competition and choice in the management and performance
of commercial activities. It is designed to empower Federal managers
to make sound and justifiable business decisions.
Reliable cost and
performance information is crucial to the effective management of Government
operations and to the conduct of competitions between public or private
sector offerors. Unfortunately, this information has not been generally
available and has often been found to be unreliable. The Chief Financial
Officers Act of 1990 (CFO Act) includes among the functions of chief
financial officers "the development and reporting of cost information" and "the
systematic measurement of performance." This includes performance
by in-house, contract or ISSA resources. In July 1993, Congress passed
the Government Performance and Results Act (GPRA), which mandates performance
measurement by Federal agencies. The Statement of Federal Financial
Accounting Concepts No. 1, "Objectives of Federal Financial
Reporting (1993)," stated that one of the objectives of Federal
financial reporting is to provide useful information to assist in assessing
the budget integrity, operating performance, stewardship, and control
of the Federal Government. In 1995, the Federal Accounting Standards
Advisory Board (FASAB) recommended standards for managerial cost accounting,
which were approved by the Director of OMB, the Secretary of the Treasury
and the Comptroller General. These standards were issued as the Statement
of Federal Accounting Standards No. 4, "Managerial Cost Accounting
Standards for the Federal Government." This Supplement relies
on the managerial cost accounting and performance standards established
in support of the CFO Act, GPRA, and the Federal Accounting Standards,
as they are developed and implemented. Cost and performance information
developed for cost comparisons required by the Circular and this Supplement
should be drawn from the data base established by these standards and
adjusted as appropriate.
The Circular and
this Supplement are not intended and should not be construed to create
any right or benefit, substantive or procedural, enforceable at law
by a party against the United States, its agencies, its officers or
any person. It should not be construed to create any substantive or
procedural basis on which to challenge any agency action or inaction,
except as set forth in Part I, Chapter 3, Paragraph K, of this Supplement
and as set forth in Appendix 2, Paragraph G, consistent with Section
3 of the Federal Activities Inventory Reform Act of 1998 (FAIR Act,
P.L. 105-270).
This Supplement
is divided into two parts (with a table of contents at the beginning
of each Part) as follows:
Part I Policy
Implementation
Sets forth the
principles and procedures for implementing OMB Circular A-76.
Part II Preparing
the Cost Comparison Estimates
Provides instructions
for calculating the financial advantage to the Government of acquiring
a product or service through in-house, contract or interservice support
agreement resources.
Appendices
Definition of
Terms Defines terms within the context of OMB Circular A-76.
Commercial Activities
Inventory Provides information and reporting guidance.
Useful Life
and Disposal Provides useful expected life and
Values disposal
values for equipment.
Tax Tables Provides
Federal tax rate tables for use in A-76 cost comparisons by industry
type.
OFPP Policy
Letter 92-1 Provides guidance and criteria for determining whether
activities may be considered inherently governmental and not subject
to the requirements of the Circular or this Supplement.
Aviation/Motor
Vehicle Provides sector-specific alternatives to the cost comparison
methodologies in Part II.